Whakatāne District Council staff have identified potential savings of between 2 and 3 percent to next year’s budget and provided options to councillors on Thursday on how it should be allocated.

In its 2024-34 Long-term Plan, the council projected an average rates increase of 12.7 percent for year two (July 1, 2025- June 30, 2026).

However, as part of the annual planning review process, a number of activities planned for year two have been identified that are either no longer required  changes in budget.

Five options were presented to councillors on how savings could be allocated, including lowering next year’s rates rise, applying the savings to the operating deficit to reduce borrowing, or looking at other projects the savings could be spent on.

Another options was  provided to increase rates further to pay off the operating deficit faster. Councillors eventually selected an option to split the savings between lowering the rates rise and reducing borrowing.

The council is borrowing annually to meet operational costs, a position that staff report is not financially sustainable.

Chief executive Steven Perdia said most councils were in a similar position as was central government.

The report said the reason for the operating deficit was insufficient rates increases over several years, beginning with the deferring of rates increases during Covid, coupled with significant inflation and increasing interest rates.

While inflation and interest rates had started to fall, it was noted in the report that this did not directly translate into equivalent reductions in council rates.

Expenditure variances discovered on a list of 20 expenditures added up to increased costs of almost $5 million and decreased costs of over $10 million.

Councillor Gavin Dennis asked whether it was possible to pause some of the projects council had in its long-term plan, such as the Rex Morpeth Recreation Hub, Mitchell Park, and Ōhope Wharf.

“Is it possible for us to take a hard look at things to actually reduce our expenditure, cut out the vibrancy stuff and concentrate on making life afforable for people and reduce debt at the same time.

“My concern is, that if we don’t we’re not going to have our great grandchildren around here in future to enjoy what we do because they can’t afford to be here.”

Mr Perdia said, “yes” it was. “I think there are some things we can do to perhaps trim things. We can have another look at our FTE (number of full-time equivalent employees).

Councillor Nandor Tanczos made the point that there were no simple answers, and cutting a couple of capital projects would have little effect on the operating deficit. He argued for paying down debt as quickly as possible given the current global climate.

Mayor Victor Luca suggested Government announcements about lowering the scope of services councils provided could allow for lower operational costs.

The decision made in council yesterday provided a clear direction for staff to develop a version one 2025/26 Annual Plan budget, which will be presented to the mayor and councillors early next year.